Hong Kong
CNN
—
The Japanese government has nominated Kazuo Ueda as central bank governor. This is a surprising move that could pave the way for Japan to scale back its ultra-accommodative monetary policy.
If appointed, Ueda, a 71-year-old university professor and former Bank of Japan (BOJ) board member, would be Japan’s longest-serving central bank governor and the architect of the current Yield Curve Control Policy (YCC) Kuroda. He will succeed Mr. Haruhiko. . His term ends on April 8th.
Ueda’s nomination must be approved by both houses, now controlled by the ruling party, before Prime Minister Fumio Kishida’s cabinet can formally appoint him for a five-year term.
Analysts say Ueda’s appointment will make it increasingly difficult for the BOJ to maintain ultra-accommodative monetary policy at a time when inflationary pressures are mounting and other central banks are aggressively raising rates. We believe that the likelihood of ending a long period of ultra-accommodative monetary policy may increase.
“Investors saw Ueda’s election as a signal to pave the way. [for BOJ] Ken Chan, chief Asian forex strategist at Mizuho Bank, said he hopes to get out of ultra-accommodative policies.
“[The] A Chance to End Yield Curve Control Policy and Negative Interest Rates[s] He added that the Bank of Japan’s monetary policy is likely to remain “accommodative.”
Yield curve control policies are a pillar of central bank efforts to keep interest rates low and stimulate the economy.
Accommodative is a term used to describe monetary policy that adapts to unfavorable market conditions and usually involves keeping interest rates low to promote growth and employment.
The Bank of Japan has implemented ultra-accommodative policies since Mr. Kuroda took power in 2013. After years of aggressive bond purchases that failed to push prices higher, it introduced a yield curve control program in 2016 to buy a target amount of bonds to push prices down. Yield to cause inflation and stimulate growth.
As part of that program, the central bank set some short-term rates at an ultra-dovish minus 0.1%, with a target of around 0% for 10-year government bond yields.
But for the price The pressure on the Bank of Japan to scale back the YCC has increased as interest rates in other regions have risen.
In December, the Bank of Japan shocked global markets by allowing the 10-year government bond yield to move up or down by 50 basis points from its target of 0%. Allows rates to rise further.
The unexpected hawkish decision sent stocks lower and yields on the yen and bonds soaring.
But Kuroda later dismissed a short-term exit from ultra-accommodative monetary policy.
The yen jumped against both the US dollar and the euro when local media first reported on Friday that Mr Ueda would be nominated as the next governor of the Bank of Japan.
“Investors interpreted the news as suggesting a turn to hawkishness,” said Stephan Anglic, senior economist at Moody’s Analytics.
“But it will take time for the impact to become apparent,” he said. “Demand-driven price pressures remain very weak and significant wage increases have yet to materialize, so it is unlikely that the BOJ will tighten policy under the new governor,” he said.
Friday, Ueda told reporters He believes that the Bank of Japan’s current policy is appropriate, and that monetary easing must continue given the current situation.
and Written opinion In an article published in the Nikkei last July, Governor Ueda warned against premature interest rate hikes.
However, in the same article, he also noted that the Bank of Japan should prepare an exit strategy, referring to an unprecedented monetary easing framework that lasted much longer than many expected, at one point ” “Serious consideration is needed,” he said.
“I don’t think he will change the BOJ’s policy stance any time soon based on his previous remarks,” ING Group senior economist Ming Ju Kang said in a recent research report.
“he [Ueda] Monetary policy is likely to change gradually, and the BOJ’s reliance on data (inflation and wage growth) will become more important. ”
Japan’s economy remains weak, highlighting Ueda’s difficult challenges ahead.
Japan’s economy grew at an annualized rate of 0.6% in the fourth quarter of 2022, reversing a contraction of 0.8% in the third quarter, according to the latest data on Tuesday. But it was much weaker than his 2% expansion in consensus predictions.
“While we believe the modest recovery will continue this year, data support today[s] The BOJ’s insistence that the recovery is still fragile and accommodative monetary policy is needed,” ING analysts said. “The incoming governor will find it difficult to initiate normalization.”
– Junko Ogura of CNN contributed to the report
